Person 1: Give me an investment tip, uncle!
Person 2: Invest in index funds, my girl. Keeping the cost of investing low is important in investing. Index funds are usually low-cost.
Person 1: What are these index funds? Why are they low-cost?
Person 2: Oh, an index fund is constructed to exactly match the component shares of a market index. So that it can mirror the performance of the market index, even as the market goes up and down.
Person 1: So?
Person 2: As it does not cost a lot to manage such funds, they are usually low-cost.
Person 1: Got it! But, does low-cost means lower returns?
Person 2: Not really, my girl. It is usually the other way!
Person 1: Oh!